Avon Products Inc.
) is scheduled to release its fourth-quarter 2011 results on
Tuesday, February 14, 2012. The Zacks Consensus Estimate is 51
cents a share for the fourth quarter of fiscal 2011, reflecting a
year-over-year estimated decline of 13.6%.
Synopsis of Third Quarter 2011
Avon Products' adjusted earnings of 38 cents per share for
third-quarter 2011 missed the Zacks Consensus Estimate of 46 cents
and slipped 7.3% from the year-ago earnings of 41 cents. On a
reported basis, including one-time items, earnings remained flat at
38 cents per share compared with the year-ago quarter.
The company's total sales rose 5% year over year to $2,706.7
million from $2,580.1 million a year ago. Total revenue also missed
the Zacks Consensus Estimate of $2,840 million.
Avon's adjusted gross margin fell 60 basis points year over year
to 64% as favorable currency impact coupled with improved pricing
was more than offset by higher product cost. Operating profit
reflected an increase of 4%, while operating margin contracted 20
basis points to 10.3%, attributable to lower gross margin.
Battered by the wretched third-quarter performance and
macroeconomic pressures, the company rolled back its earlier
forecast. Avon no longer expects revenues to increase in mid-single
digit in fiscal 2011 with an expansion of 50 to 70 basis points in
The analyst covered by Zacks expects Avon to post fourth-quarter
2011 earnings of 51 cents a share, lower than 59 cents delivered in
the prior-year quarter. Currently, the Zacks Consensus Estimate
ranges between earnings of 26 cents and 63 cents a share.
For fiscal 2011, the Zacks Consensus Estimate stood at $1.76 per
share, lower than its previous fiscal earnings of $1.80. The
current Zacks Consensus Estimate ranges between $1.50 and $1.88 per
Agreement of Estimate
For the fourth quarter of fiscal 2011, of the 13 analysts
covering the stock, 4 analysts revised their estimates downward,
while none have revised the same in the opposite direction in the
last 30 days. For full fiscal 2011, 4 analysts revised their
estimates in negative direction, while 1 analyst revised the same
in the positive direction, in the last 30 days.
In the last 7 days, no movement in estimates has been noticed in
either direction for fourth-quarter 2011 or fiscal 2011. This
indicates that the analysts do not see any major catalyst driving
the quarterly results.
Magnitude of Estimate Revisions
With heavy negative affect from earnings revisions by analysts
in the last 30 days, the Zacks Consensus Estimates for
fourth-quarter 2011 has decreased by 2 cents to 51 cents per share
while for fiscal 2011 it lowered by 1 cent to $1.76 per share.
However, the magnitude of estimate revisions for Avon Products
depicts a neutral outlook for the upcoming fourth quarter and
fiscal 2011. Over the last 30 days, estimates for the upcoming
quarter and fiscal 2011 have remained unchanged at 51 cents and
$1.76 per share, respectively.
With respect to earnings surprises, Avon has missed as well as
topped the Zacks Consensus Estimate over the last four quarters in
the range of negative 17.4% to positive 19.4%. The average remained
at negative 3%. This suggests that Avon has missed the Zacks
Consensus Estimate by an average of 3% in the trailing four
We believe that the company's initiatives to change the product
mix and reposition the business in the U.S. market will require
significant expenditure to support increased advertising and
promotional activities, which may dent its margins. Furthermore,
Avon is a highly leveraged company, limiting its financial
flexibility to drive future growth.
Additionally, Avon competes against products sold to consumers
by other direct-selling companies and against products sold in the
mass market and through prestige retail channels. The company
competes head-to head with
Currently, Avon retains a Zacks #4 Rank, which translates into a
short-term 'Sell' rating. Our long-term recommendation on the stock
AVON PRODS INC (
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